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Following a disaster, here is a checklist of issues you need to consider before and after reopening your business. This is part two of a series

Posted in Business

By David Jenkins*

Businesses may be affected by disasters directly and indirectly.

For instance, businesses may not be directly caught in a disaster, but the resultant decline in trade will affect the business.

This is the second in our series and provides information to assist businesses that are both directly and indirectly affected by disasters.

Following a disaster, it is anything but ‘business as usual’ for you, your employees and customers.

The faster you can return your business to some level of normal operations, the quicker you can restore your income, jobs and the goods and services you supply to your customers.

Businesses will be affected by a disaster in different ways.

This checklist is aimed to assist businesses that have been directly affected by a disaster.

It will lead you through some of the many issues you will need to consider before and after reopening your business.

Preliminary Assessment  
Mark with a ‘Yes’ or ‘No’ when you have considered a question or tick where you have acted upon a question.  
Should you re-open your business?  
 • Were you happy running the business before the disaster?
• Were you making the profit you wanted?
• Do you prefer being your own boss?
• Have you considered other opportunities?
• Are you prepared for the potential extra demands that recovering your business will place on you, both personally and financially?
Have you done an assessment of the damage?  
• Are your premises operational?
• Can you recommence trading from your premise without significant repairs?
• Is any of your stock, supplies and equipment recoverable?
• Have any of your staff been affected by the disaster?
What are your chances for future success?  
• Have you analysed the potential demand for your product or services post disaster?
• Have any of your key customers and/or suppliers been affected by the disaster and if so, will this impact your business?
• Has the disaster lead to other businesses in your area closing and if so, have you determined how this may impact on your business?

 

Preliminary Actions  
Have you contacted your insurer?  
 • Have you given your insurer your preliminary damage assessment?
• Has your insurer been able to tell you what your insurance payout is likely to be, when will it be made and whether it will be in the form of cash or asset replacement or a mix of both?
Have you contacted your staff and other key stakeholders?  
• Are you keeping staff and stakeholders, including key customers suppliers and lenders informed of what you are doing?
• Do you need to disengage staff for the time being?
• Do you need to postpone purchasing supplies for the time being?
• Can you cancel orders that you have made?
• If customers have ordered stock and it is lost or you can not supply at this time, have you informed those customers?

 

Financial position of the business  
What is the current financial position of your business?  
• Have you reconstructed the financial records of your business?
• If you can not fully reconstruct your accounts, do you have access to historical financial statements or industry benchmarks?
• Have you determined how much cash your business has currently available by creating a cash flow statement?
• Have you created a balance sheet and a profit and loss statement from the beginning of the current financial year to the time of the disaster?
• Have you used the information in the cash flow statement, profit and loss statement and balance sheet to analyse the financial health of your business at the current point in time?

 

Recovery Plan  
Questions to consider in creating a recovery plan include:  
• Have you considered and noted your recovery objectives, actions and priorities?
• Have you established a recovery team with clear responsibilities from the recovery plan?
• Can you support such team members working off-site?
• Are you aware of all the requirements to reopen the doors for business? For example:
   • Do you need to arrange for the short-term lease of essential equipment until they can be replaced?
• Do you have adequate resources (staff, finances, etc) to bring the business up to normal operating levels or to a level you want or to the level that reflects the current market conditions?
• Have you costed your recovery plan?
• Can you afford such a plan?
• Do you have a marketing strategy to promote that you are open for business?
• Have you incorporated your lessons from running your business prior to the disaster (good and bad) in your recovery plan?
• Have you incorporated your analysis of the market conditions post the disaster in your recovery plan?
• Does the recovery plan reflect your financial goals (for example the profit, net profit margin or return on investment you want to achieve)?
Have you considered the following your recovery plan:  
• Addition of new product lines or removal of existing product lines?
• Addition of new services or a reduction of services?
• Reducing operating costs?
• Adoption of new technologies and processes?
• Relocation?

 

Funding the reopening of your business  
Can you afford to reopen your business?  
• Have you completed cash flow and profit and loss forecasts?
• Have you used these forecasts to run ‘what if’ scenarios to measure how your cash flows will be impacted by unexpected events?
• Do you intend to fund the reopening of your business from existing sources from the business, your own resources, other investors and banks and other lenders or a mix?
• Do the forecasts and your financial statements show whether the business can afford to use internal or external sources of finance to fund the reopening?
• If not, can you adjust your recovery plan so that it is affordable?
• If you can not afford your recovery plan, have you considered exiting your business?
• Where the business has existing debt financing arrangements, have these been reviewed to ensure that the finance facility and structure fits the new needs of the business?
Sources of finance  
• Even if you can fund the reopening of the business from existing sources, have you analysed whether it is better to use external sources of finance?
• If you are seeking debt finance, have you spoken to your bank about your recovery plan and your funding needs?
• What existing lines of credit does the business have access too and can these lines of credit be accessed to fund the reopening of business?
• If you do seek debt finance, what security does the business now have available?
• If you are seeking debt finance, have you determine for what reason you are seeking the money for (e.g. to fund stock purchases or the buy equipment), over what term you are borrowing for and how much?
• Have you considered financing the reopening of your business from your own resources or from other investors?

 

Physical requirements  
Location  
• Given the potential changed market conditions, is your business premises situated in the right location?
• Are there any plans by local government or others that may impact the viability of the location of your business, such as changes that may restrict access?
• Have other businesses reopened or are going to reopen in your area?
• Is the size of your premises to large or small given the future potential of your business?
Major Equipment  
• Do you still have the plant and equipment your business needs to restart?
• If not, will you receive such equipment from your insurer or will you have to purchase this equipment?
• If you have to purchase the equipment, have you analysed whether it is better to pay for, lease or hire purchase the equipment?
• Is the purchase of the equipment (including maintenance costs and insurance) justified given the possible changed market conditions?
• Is the necessary expertise readily available to install the equipment?
 Inventory  
• If stock or supplies are to be replaced, have you reviewed historical information to see which stock is slow-moving?
• For stock identified as slow moving, have you considered removing from your range?
• Have you made an assessment of whether the changed market conditions will impact upon the buying patterns of your customers?

 

Marketing  
• Do you intend to advertise that your business has re-opened?
• Is there any promotion of your local area by government and others?

 

Pricing  
• Have you undertaken a break/even analysis to determine whether the prices you charge are making the profit you want to achieve?
• Have you compared your pricing to your competitors?

 

Staffing  
• Are your existing staff still willing and able to work for you?
• Can the staff assist with the re-opening of the business?
• Has the potential changed market conditions (possible falling demand) impacted on your ability to retain your existing staff and on the hours they previously worked?

 

Lessons learned  
• Have you documented lessons learnt from your business recovery?
• Have you considered putting in place a business continuity plan to help you in case you go through another disaster?
• Have your reviewed your insurance policies to see whether they are adequate and whether there are any gaps in your insurance coverage?

 

Other  
Business licenses, etc  
• If you lost copies of your business registration certificates, licenses and other official documents necessary to operate your business, have you approached the relevant agency to get them replaced?
Record keeping  
• Have you considered what accounting system are you going to use or continue to use to keep the financial records up to date?
• Are there any improvements you can make to your record keeping system, such as keeping backups of your financial system offsite?
Meeting statutory obligations  
• What statutory obligations you have to meet, such as lodging a tax return?
• Has the requirements to lodge and pay such returns/forms/obligations been delayed?
• Has your reconstructed financial records given you the necessary information and evidence to be able to complete such returns?
Thanking everyone  
• Have you thanked everyone involved in assisting you?

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David Jenkins is the New Zealand-based manager of the global professional accounting body, CPA Australia. You can contact him directly here »

This is the second of a series on disaster recovery.

The first one builds a recovery template and is here »

Next week will focus on reconstructing financial records after a disaster.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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